Related Articles

The rehiring of retired employees has become a controversial practice, particularly in civil service jobs where municipal budgets are tight and paying retirement benefits plus a salary to the same individual has been criticized. However, the expense and time involved in hiring new employees with adequate skills and training them, combined with the fact that many people over 60 are still healthy and active, has made the rehiring of retired employees attractive to many companies.

The Retire-Rehire Controversy

Two major elements of rehiring retired employees affect public employee retirement systems, which might affect your own company's policies. The first involves the fact that retirement programs were normally not set up to accommodate non-participating employees, nor were they set up to accommodate employees who accept retirement income and then return and accumulate additional retirement benefits at the same place of employment. Furthermore, the IRS also is not prepared for this phenomenon and some of its regulations regarding the taxation of retirement income and tax deferral of contributions are being tested. When establishing a policy on the rehire of retired employees in your company, consider how it would affect your company's retirement program and how your policy meshes with the latest IRS policies.

Benefits of Rehiring Retired Employees

The skill level of your company's employees is an important factor in its ability to compete. When an experienced employee retires, it might be difficult and expensive for you to replace that skill level with a new hire if other employees can't be spared or don't have the knowledge. Returning employees also know the culture and operations of your company and can immediately produce, but an outside hire has a steep learning curve before she can become fully functional.

Problems with Rehiring Retired Employees

When bringing in a retired employee, you might be unwittingly creating resentment among current employees who had hoped to fill the open position. There also might be resentment over the employee receiving what appears to be a double salary. If you bring a retiree back at reduced hours or at a different pay scale, it might not solve the production gap created by her retirement and require a new hire or transfer of another employee to fill the gap.

Creating Policies that Work

Factors to consider in designing your policy include where the rehire works in your company and if she is hired back into her old job, how soon after retirement the employee can return, and whether the returning retiree will be an independent contractor, consultant, temporary or part-time employee. When you establish your policy, decide whether or not to have an agreement regarding rehire as the employee approaches retirement eligibility -- there may be legal and tax implications. Other considerations involve the number of hours to be worked, level of pay, whether as an employee participates again in a retirement program and benefits, and whether the job is open-ended or specifically tied to a particular project or time-frame.

About the Author

Victoria Duff specializes in entrepreneurial subjects, drawing on her experience as an acclaimed start-up facilitator, venture catalyst and investor relations manager. Since 1995 she has written many articles for e-zines and was a regular columnist for "Digital Coast Reporter" and "Developments Magazine." She holds a Bachelor of Arts in public administration from the University of California at Berkeley.